Asked by
Liliana Hernandez
on Dec 09, 2024
Verified
You are expecting a payment of 350,000PLN six years from now. The risk-free rate of return is four % in the U.S. and three % in Poland. The inflation rate is three % in the U.S. and two % in Poland. Currently, you can buy 291PLN for 100USD. How much will the payment six years from now be worth in U.S. dollars?
A) $127,751
B) $138,525
C) $749,511
D) $1,057,269
E) $1,081,158
Inflation Rate
The speed of growth in the average price level of goods and services, decreasing the effectiveness of purchasing power.
Exchange Rate
The value of one currency for the purpose of conversion to another, dictating how much one currency is worth in terms of another.
Risk-free Rate
The theoretical return on an investment with zero risk, typically represented by government bonds or bills of a stable government.
- Understand how inflation rates influence foreign exchange rates and determine the corresponding value among various currencies.
- Utilize exchange rate figures to alter monetary values between various currencies for pragmatic purposes, including travel planning and making purchases.
Verified Answer
AV
Learning Objectives
- Understand how inflation rates influence foreign exchange rates and determine the corresponding value among various currencies.
- Utilize exchange rate figures to alter monetary values between various currencies for pragmatic purposes, including travel planning and making purchases.